Good morning. My name is Michelle, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company Fourth Quarter and Full Year 2022 Earnings Release Conference Call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawco.com under Investor Relations section. All lines have been placed on mute to prevent any background noise. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, March 7, 2023. Now, I would like to introduce Tami Stevenson, Crawford & Company's General Counsel. Please go ahead.

Thank you, Michelle. Some of the matters we discuss in this conference call and the supplementary financial presentation may include forward-looking statements that involve risks and uncertainties. These statements may relate to, among other things, our expected future operating results and financial condition, our ability to grow our revenues and reduce our operating expenses, expectations regarding our anticipated contributions to our under funded defined benefit pension plans, collectability of billed and unbilled accounts receivable, financial results from our recently completed acquisitions, our continued compliance with financial and other covenants contained in our financing agreements, our long-term capital resource and liquidity requirements, and our ability to pay dividends in the future. The company's actual results achieved in future quarters could differ materially from the results that may have been implied in such forward-looking statements. The company undertakes no obligation to publicly release revisions to any forward-looking statements made in this conference call to reflect events or circumstances occurring after the date of the call or to reflect the occurrence of unanticipated events. In addition, you are reminded that operating results for any historical period does not necessarily indicative of results to be expected for any future period. For a complete discussion regarding factors which could affect the company's financial performance, please refer to the company's Form 10-K for the quarter ended December 31, 2022, filed with the Securities and Exchange Commission, particularly the information under the headings Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as subsequent company filings with the SEC. This presentation also includes certain non-GAAP financial measures as defined under SEC rules. As required, are conciliation is provided for those measures to the most directly comparable GAAP measures. I would now like to introduce Mr. Rohit Verma, Chief Executive Officer of Crawford & Company. Rohit?

Thank you, Tami. Good morning, and welcome to our fourth quarter and full year 2022 earnings call. Joining me today is Bruce Swain, our Chief Financial Officer; Joseph Blanco, our President; and Tami Stevenson, our General Counsel. After our prepared remarks, we will open the call for your questions. Before we begin, I would like to extend our thoughts to all those that have been impacted by the devastating earthquakes that hit Turkey and Syria in early February. The severity and frequency of catastrophic events continues to increase and is making our work even more meaningful in these difficult times. I convey my sincere gratitude to all insurance professionals and rescue workers engaged in helping those that have been impacted. Turning to our results. Crawford delivered record revenue in the fourth quarter and the full year, highlighting the significant progress we have made on our long-term growth strategy. For the full year, revenues reached nearly $1.2 billion, an increase of 8% over the prior year or 11% on a constant currency basis. This quarter marked our ninth straight quarter of revenue growth. Since we laid out our growth strategy two years ago, we have consistently delivered top-line expansion, which highlights the strong execution and dedication of our global team. In North America loss adjusting, we shared our growth plan that was centered on building our team of experts for large and complex accounts and expanding our US footprint to drive deeper penetration in local and regional markets. We are currently well ahead on our hiring goals, and as a result, our sales momentum with large and complex claims is increasing, while at the same time, we are driving market share gains with local and regional carriers. We have seen increasing demand for our differentiated services, as claims complexity rises and…

Thanks, Rohit. Beginning with our North American loss-adjusting business, we experienced double-digit revenue growth and expanded operating margins in both the fourth quarter and the full year. Throughout 2022, we demonstrated our ability to execute on our long-term strategy as we continue to deepen our relationships with both large and small to midsized US carriers. Full year revenues grew 13% with a strong contribution from increased activity related to Hurricane Ian and Winter Storm Elliott as well as recovering economic activity in Canada and the full year impact of the 2021 edjuster acquisition. On the Major and Complex side, we have nearly doubled our US revenues in the past three years driven by our targeted investments and expertise and expanded relationships with large carriers. We are also increasing account nominations with marquee corporate clients, including a leading global restaurant chain, a commercial real estate developer and a leading automotive OEM. Despite a very competitive labor market in 2022, we onboarded more than 100 specialist adjusters across our Major and Complex business worldwide, with just under half added in North America alone. We exceeded our 2021 additions and are within reach of our previously outlined three-year goal of hiring 200 specialist adjusters nearly one year early. This underscores our reputation as a top-tier destination for adjusting talent, as we expand our focus areas and capabilities. On the volume side, we made progress in 2022, by expanding our robust sales pipeline across the US and driving new business wins. We saw the benefits of our strategy play out in the fourth quarter, as utilization improved. We were able to capture increased claims volume, which rapidly accelerated from Hurricane Ian and Winter Storm Elliott. Our Broadspire business delivered increased revenue margins in 2022. We saw improved traction from our focused efforts to expand…

Thank you, Joseph. Company-wide revenues before reimbursements in the 2022 fourth quarter were a record $322.2 million, up 10% from $292.9 million in the prior year quarter. Foreign exchange rates decreased revenues by $14.5 million or 5% for the quarter. On a constant dollar basis, revenues totaled $336.7 million, representing growth of 15%. The GAAP diluted EPS in the 2022 fourth quarter was a loss of $0.29 for both CRD-A and CRD-B, compared to earnings of $0.03 for both share classes in the 2021 period. On a non-GAAP basis, fourth quarter 2022 diluted EPS was $0.23 for both CRD-A and CRD-B, compared with $0.07 for both share classes in the 2021 period. As we mentioned on the third quarter call, the income tax benefit from the goodwill impairment normalized through our effective tax rate in the fourth quarter and resulted in $12.4 million in additional tax expense or $0.25 per share. In addition, the company recorded an income tax reserve of $11.8 million or $0.24 per share on certain international tax assets during the 2022 fourth quarter. The company's non-GAAP operating earnings totaled $23.3 million in the 2022 fourth quarter or 7.2% of revenues, increasing from $9.1 million or 3.1% of revenues in the prior year period. Consolidated adjusted EBITDA was $30.8 million in the 2022 fourth quarter or 9.6% of revenues compared to $17.6 million or 6% of revenues in the 2021 quarter. I'll now review the fourth quarter performance of each of our segments. North America loss adjusting revenues totaled $77.7 million in the 2022 fourth quarter, up 16.1% from $66.9 million reported in last year's quarter. Foreign exchange rate impacts were insignificant in the quarter. The segment reported operating earnings of $8.9 million in the 2022 fourth quarter, up from $3.2 million reported in last year's quarter.…

Thank you Bruce. 2022 marked another year of strength and resiliency for Crawford as we delivered on our purpose. Our results highlight our effective growth strategy, which drove our record revenue for the year and we remain committed to ensuring this growth translates into expanded profitability across the company. We enter 2023 with positive momentum and further strength of resolve to return to profitability in International. Overall, we believe we are in a solid financial position and we are confident in our ability to deliver enhanced growth and profitability as well as return value to our shareholders. Thank you for your time today. Michelle, please open the call for questions.

Thank you. [Operator Instructions] The first question comes from Kevin Steinke of Barrington Research. Please go ahead.

Good morning and congratulations on the strong results.

Thank you Kevin.

Thank you Kevin. How are you?

I am great. How are you?

Good, good.

Good. So I wanted to ask in terms of SG&A expenses on the -- as shown on the income statement, we're actually slightly down sequentially and down year-over-year and that helped you achieve some strong operating leverage? Are there some cost initiatives that are helping that line, or was there anything one-time that benefited that? Just what -- how would you think about that SG&A line trending going forward?

Yeah. Kevin there are three or four factors. Some of them are one-time others are more structured, but I'll let Bruce go into the detail of that.

Sure. Yeah. So – hi, Kevin it's Bruce. We had some cost in the 2021 fourth quarter that took our profits down in last year's quarter that weren’t continuing in 2022. So that's a piece of it. We also had lower incentive compensation this year compared to 2021, which is also showing up in that line as well. Last year we had higher professional fees for a number of things. We were more acquisitive in 2021 than we were in 2022. And the absence of those costs is also helping the SG&A line.

Okay. Prospectively going forward, I'm guessing that you feel like you could grow the top line faster than SG&A expenses.

That's the goal. We think that our administrative cost base is leverageable and that we should be able to put a material amount of revenue on the top line without a corresponding increase in SG&A. I mean, there will be certain areas that we invest in as we go forward. But the core back-office functions are very leverageable for the company.

Okay, great. And I think you mentioned in your prepared comments North American loss adjusting margins, obviously, expanded in 2022. I believe you said you feel like you continue to expand margins going forward. So are we at a point where you're beginning to leverage those investments in specialist adjusters and the revenue associated with those investments is going to start helping to drive that leverage and margin expansion?

That's correct Kevin. And we believe that there is still a significant headroom for us to grow in that space. So we're not slowing down our investment. But we certainly believe that the investments that we've made so far are demonstrating the results and encouraging us to continue the investment profile in that business.

Okay, great. It sounds like you're making good progress on the international front. Obviously there are some severance expenses in the quarter that impacted the operating earnings for International, but I assume that will help drive some of the improvement in 2023. Can you just talk about maybe again outline the factors that you expect to drive international improvement as we move throughout this year?

For sure. If you just looked at -- if you netted the severance expense out and you looked at Q4 versus Q3, our margin already shows an improvement, albeit it's still below where we expect it to be. And I think when you -- when we look at Q1, the way we are seeing the momentum continue, we believe the margins will continue to grow. It's certainly behind the time line that we would have wanted our ideally we should have seen margins to our desired levels by Q4. But as I've shared with you before that making some changes in International has taken longer than what we anticipated. So we believe that we're on a solid trajectory. In terms of the changes, as I've outlined in the script, we've made changes to our pricing where we believe we needed to. We've realigned our management structure to align more with our markets that we serve. We have taken some very specific contracts, which were not written in our favor, and basically put them to -- have exited those contracts or at least terminated that's -- those specific parts of the contract. And all those things we believe are helping. We've also had a renewed focus on changing our mix of business particularly in places like Europe, as I've mentioned before to not be so heavily invested in pure travel and entertainment-based business, but focus more on things like construction and other aspects of industry verticals that we believe are more resilient to an economic cycle. So that's what's giving us the confidence for International. As I outlined, there's clearly more work to be done, but we are extremely encouraged by the results that we're seeing already.

Okay. Good. And you called out an improvement in medical management trends. Can you just touch on that? Do you think you're actually starting to see the kind of recovery here that's been -- seems to have been delayed for quite a while?

Yes, we are seeing some recovery. I mean, I think if we look at 2021 that was roughly about 18% below pre-pandemic levels. I think we're now close to somewhere between 10% and 12% below the pre-pandemic levels. So we believe that we are making the recovery that we need to make. It's been again slower than what we would expect it to be. We still haven't come across a true secular trend of lower use of medical management, but it's -- we just believe that because more people are working from home, travel patterns have changed. Those things are impacting medical management, because we certainly see the claims frequency coming back up, but we haven't seen that medical frequency come back up.

Okay. Lastly, obviously, a lot of discussion about macroeconomic uncertainty and just wondering if you're seeing anything in your business that would indicate that macroeconomic uncertainty is starting to impact claims volume or any other indicators about that front that you would call out?

Kevin, that's a great question. And we have been honestly looking for patterns but we have not spotted any pattern in terms of RFP activity, in terms of engagement with customers, claims activity, our clients taking on new ventures. We have not seen any of that at least in our client base that would indicate a slowdown of any kind from an economic activity standpoint. So we are looking for that pattern as well but have not spotted anything.

Okay. Thanks for the insight. I'll turn it over. Thanks.

Thanks, Kevin.

Thanks, Kevin.

Thank you. The next question comes from Maxwell Fritscher of Truist Securities. Please go ahead.

Hi, good morning. I'm calling in for Mark Hughes. We all touched on most of my questions I had, but I just had one quick one. A few quarters ago you all had mentioned that many of your competitors or at least some of your competitors were operating in the 6x to 7x EBITDA leverage range and with you all sitting at 2.1, I wondering if you all have seen any direct benefits from that in this higher for longer rate environment?

Well, it's hard to say that we're seeing -- we can specifically point out the benefits that I can attribute to a certain competitor. But what I can tell you is that as we are out in the marketplace and engaging with clients, we certainly believe that our capital structure and our debt position allows us to make much investments on a much more longer term, create partnerships that span over a much longer period of time as we are not constrained by any kind of leverage max out. So those are the benefits that we talk about. It gives us the ability to -- from a capital expense perspective, it gives us tremendous flexibility to make capital expense and candidly be prepared for any kind of macro environment that comes our way or any kind of competitive environment that comes our way. So that's how I would say it's helping us specifically, because we don't really discuss that in the marketplace.

Okay. Thank you.

Thank you.

Thank you. There are no further questions. I will turn the call back to Mr. Verma for closing remarks.

Thank you, Michelle. Once again, in 2022, we made tremendous progress in advancing our strategic growth objectives. We entered 2023 with an optimistic outlook and remain focused on delivering further value for our shareholders. We look forward to having you join us on the journey ahead and thank you for your continuing support. Thank you and God bless.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning 11:30 a.m. Eastern Standard Time today through 11:59 p.m. on April 7, 2023. The conference ID number for the replay is 567-314. The number to dial for the replay is (877) 674-7070 or (416) 764-8692. Thank you. You may now disconnect.